GMS Power Grid Who gains, who loses? Chuenchom Sangarasri Greacen 17 July 2005 Piyawan Resort

Implementation of GMS Power Trade Operation Agreement- Stage 1 Leaders from 6 countries met GMS Summit in Kunming, China 4-5 July 2005 MOU Implementation of GMS Power Trade Operation Agreement- Stage 1

Implementation of GMS Power Trade Ageement – stage I What is ? MOU Implementation of GMS Power Trade Ageement – stage I Purpose “To set an implementation framework for bilateral power trade between countries with transmission links in accordance with the draft GMS Power Trade Operation Agreement – stage I” For Thailand, EGAT is the designated entity responsible for plan implementation

Asian Development Bank (ADB) Norconsult June 2002

Indicative Master Plan on Power Interconnection in the GMS Benefits : Exchange energy e.g. during different peak periods Reduce shared reserve margin Maximize efficient utilization of resources in the GMS

Reality of GMS Power Grid: expensive, risky investment US$billion Project cost 43.50 - 44.96 Cost savings* 0.45 - 0.91 % benefit of total cost 1.0 – 2.1% Costs excluded in analysis: Control center Water usage Regulator & reliability coordination Transitional costs Increased vulnerability: events in Laos/Cambodia determine reliability of Thai Grid *Cost savings of extended power cooperation scenarios over base case Source: Comments on Indicative Master Plan on Power Interconnection in GMS Countries by Bretton W. Garrett, P.Eng., Ph.D.

PPA and Regional dispatch Regional Power Trade Operating Agreement in the Greater Mekong Sub – Region: GMS RPTOA PPA and Regional dispatch Institutions Performance Standards Planning Transmission Tariffs

Goals for Stage # 1 PTOA: Bilateral Power Transactions; Tariffs for cross-border transmission facilities; Regional and Operational transmission planning; Putting in place regional institutions: Regional Regulatory Board, Planning Working Groups, Management Committee Recommended: Agree and apply rules for Long-term PPA Arrangements for facilitating building of cross-border transmission facilities.

Stage 2-4 Stage 2: power trade among more than 2 countries Stage 3: All GMS countries are connected by HV transmission links and independent power producers can sell electricity Stage 4: Complete competitive power trade in Regional Power Pool

Analyses of Dr. Brettron Garrett Transmission expert from BC, Canada http://www.palangthai.org/en/policy

1. “The most serious concern is the wisdom of committing to an expensive, long-term electricity trade arrangement without certainty of the economic benefits”

ADB’s assumptions on benefits of the GMS grid Peak sharing can reduce costs, need for reserve margin Lots of cheap hydropower will be built in Laos, Burma and Yunnan, and can displace electricity generation from gas and coal. Competition among different dam projects in the region will drive cost down so consumers will enjoy low, competitive price

Assumption 1. peak sharing Opportunity for peak reduction Something to be gained from sharing of peak load Hydro is cheaper than thermal and that there are plenty of hydro projects in Yunnan, Lao, Burma Once these are built and a transmission grid is in place there will be a market and costs will

Assumption 2 Hydropower is cheap Hydropower is plentiful Cheap power from dams will displace power generation from gas and coal plants

Assumption 3. GMS grid+competitive trade will drive the price down

Fact 1. peak sharing can reduce peak by only 2.5% Something to be gained from sharing of peak load Hydro is cheaper than thermal and that there are plenty of hydro projects in Yunnan, Lao, Burma Once these are built and a transmission grid is in place there will be a market and costs will

Fact 2.”Cheap hydropower” is only an assumption, not findings from studies

Fact 3.No competition Stage 4 is difficult/impossible to reach and there is no set timeline for it to happen With no competition, there is opportunity for price gouging as seen in California

Conclusion: Extremely risky investment Total investment 200,000 million baht (incld. Building dams) May result in benefits worth 90,000 million baht but highly uncertain What is certain is consumers in the GMS have to pay 48,000 billion Baht

2. Regulatory body Balance interests of investors against consumers RPTOA suggests against having a highly independent regulatory No public participation No consideration of other greener, cheaper alternatives

3. Extremely difficult and expensive to harmonize grid standards across the region Split-second decisions by operators in one country can affect the whole region The Canadian economy lost 16,000 million Baht in August 2003 when a negligent USA utility caused a massive blackout.

4. Vulnerability of power interconnection to political situation

Who gains, who loses? GMS consumers are sure to foot the bill of 48,000 million baht to build the grid Economic benefits are highly uncertain and unlikely High risks: technical, environmental & social, political Benefits from dam construction go to multinational corporations, investors, contractors

Who gains, who loses?

Win-win trade? To communicate the concept of a regional grid to the public, a Thai utility used an advertisement campaign featuring the common Thai dish kraprao gai khai dao, or "chicken stir-fry with basil and fried egg." To eat the stir-fry without fried egg, or fried egg without chicken stir-fry, is considered incomplete. In the advertisement, an exchange between two countries with complementary electricity resources is likened to two people, one with chicken stir-fry and the other with fried egg, sharing to create a win-win situation. Is the Mekong Power Grid a case of sharing chicken stir fry and basil with our neighbors? Most likely not. It's caviar and fine French wine for lunch at the Mekong Country Club. But it looks like we ratepayers are buying. And we're not invited to the table.

Without GMS Grid, Thailand’s energy security would be at risk? บันทึกความเข้าใจ แนวทางการดำเนินงานตามข้อตกลง ด้านการปฏิบัติการเพื่อการซื้อขายไฟฟ้าระหว่างประเทศในกลุ่มอนุภูมิภาคลุ่มแม่น้ำโขง ระยะที่ 1 Without GMS Grid, Thailand’s energy security would be at risk?

ADB: Peak demand in 2020 Source: Norconsult, Indicative Master Plan on Power Interconnection in GMS Countries, June 2002

Energy security or business expansion ?

Thailand’s current demand forecast (Jan04) Annual increases (MW)

Source: Thai Ministry of Energy, 2003

Biogas from pig farms Reduces air and water pollution Produces fertilizer Produces electricity Biogas from pig farms

Village-scale microhydro Mae Kam Pong village, Chiang Mai 40 kW Community cooperative Expected gross revenues: 30,000 baht/month

What is Decentralized Energy (DE)? Electricity production at the point of use, irrespective of size, fuel or technology – on-grid or off-grid: On-site renewable energy High efficiency CHP / cogeneration On-site industrial energy recycling

Decentralized Energy – The Main Choices Reciprocating Engines Small Gas Turbines PV Stirling Engines Microturbines Fuel Cells

Global DE Development Data from WADE’s ‘World Survey of DE - 2005’ 60 50 40 DE share as % of total power generation 30 20 10 US UK Finland Russia China Chile India Mexico Brazil France Denmark Germany Canada Portugal WORLD Netherlands

Worldwide energy losses Electricity Generation Worldwide (TWh) (source: International energy Agency 2002)

World All-Energy Investment, 2001 - 2030 Network investment needs exceed generation needs by 17% 46% Power generation 54% Network T&D $5.2 trillion of investment Source: International Energy Agency, 2003 Reference Scenario – Business-as-Usual

Utilities expect network costs to increase sharply Historical Utility Cost Base Expected

IEA Analysis - DE Scenario is lower cost OECD Investment in Reference (BAU) and Alternative Policy Scenarios, 2001-2030 20% lower investment need; CO2 emissions remain at 2000 level Alternative scenario: More DE More efficiency More renewables Source: International Energy Agency, 2003

Ireland – retail costs for new capacity to 2021

China – retail costs for new capacity to 2021

Ireland – CO2 emissions from new capacity to 2021

China – CO2 emissions from new capacity to 2021